Budget Office Report Says Tort Reform Does Little
to Decrease Healthcare Costs
On January 8, 2004, the Congressional Budget Office,
the CBO, issued a report relating to the limitation
of tort liability for medical malpractice. In this
report, the CBO establishes that tort reform will
do little to decrease overall healthcare costs.
The CBO report notes that cyclical patterns in the
insurance market and lower investment income have
played major roles in the recent rise in malpractice
insurance premiums. "Insurance companies'
investment yields have been lower for the past few
years, putting pressure on premiums to make up the
difference. According to the General Accounting Office
(GAO), annual investment returns for the nation's
15 largest malpractice insurers dropped by an average
of 1.6 percentage points from 2000-2002."
The report goes on to note that in the late 1980's
premiums rose sharply because insurers' expectations
of future claims proved to be too high. Moreover,
in some states malpractice premiums have been sharply
affected when major insurance companies have decided
to withdraw from the market. In such instances, a
reduction in the supply of malpractice insurance drives
up premiums in the short run.
The CBO report also suggests that the available evidents
demonstrates that very few medical injuries ever become
the subject of tort claims. It cites a 1984 study
out of New York that showed only 1.5% of negligence
led to a claim.
The CBO also reports that it found no "statistically
significant difference in per capita health care spending
between states with and without limits on malpractice
torts." In fact, the CBO found that malpractice
costs only amount to less than 2% of overall health
The CBO report concludes: "the evidence
available to date does not make a strong case that
restricting malpractice liability would have a significant
effect, either positive or negative, on economic efficiency.
Thus, choices about specific proposals may hinge more
on their implictions for equity--in particualr, on
their effets on health care providers, patients injured
through malpractice, and users of the healthcare system